What is a Transit-Oriented Development?
Before we explain why a transit-oriented development might be a smart market for your next flip, let’s define this type of development.
A transit-oriented development is a vibrant, walkable urban community with a mixture of housing, offices, retail shops, dining, entertainment, and other amenities—all centered around reliable public transportation, often a rail system.
What’s the Goal of Transit-Oriented Developments?
The idea behind this type of development is to create a community where people can live, work, play, and raise a family without the traffic, congestion, long commute times, and added expenses of owning a car.
Given this, it’s understandable why a transit-oriented development would include community town centers, multi-family residential properties, banks, restaurants, civic meeting spaces, movie theaters, and grocery stores—while discouraging gas stations, storage facilities, drive-through fast-food chains, and big-box retailers, which are all places that encourage cars.
What’s Behind the Growing Popularity of These Developments?
Why are transit-oriented developments becoming so widespread? For one thing, they have active governmental support and encouragement. A report published by the EPA cites research showing that transit-oriented developments emit 43% fewer emissions than comparable suburban developments. This is because many of their residents choose to commute by train, on foot, or favor bike-riding over driving cars to work.
The Federal Transit Administration (FTA) is also actively encouraging transit-oriented developments, with programs to offer cities financial and technical assistance and other resources for their development projects.
As a 2017 story from the National Association of Realtors® points out, transit-oriented developments are driving new investment because these communities offer many benefits, including:
- Putting undeveloped and underdeveloped properties to more productive uses
- Slowing the pace of urban sprawl
- Reducing traffic congestion
- Contributing to sustainability through less reliance on cars
And finally, transit-oriented developments are growing in popularity because they fit the lifestyle preferences of Millennials, the largest generation in US history. As research on transit-oriented developments from Florida Atlantic University explains, 51% of Millennials prefer living in attached housing where they can walk to shops. The report also notes that while 32% of Millennials say they walked to work or school, while only 19% of Generation X and just 13% of Baby Boomers said the same.
They have a very specific vision for their lives—a vision often centered around being able to walk, not drive, to the places that matter to them, or easy access to high-quality public transportation.
What This All Means for Your Next Investment
Okay, we’ve established that transit-oriented developments benefit the people who live and work there. But what does this have to with where you find your next property to flip?
Think of it this way. People interested in living in or near a transit-oriented development are a highly discerning subset of the population. They have a very specific vision for their lives—a vision often centered around being able to walk, not drive, to the places that matter to them, or easy access to high-quality public transportation.
Which is why, as infrastructure solutions firm HNTB found in its study, 55% of Americans would pay a higher rent or mortgage to live in an area where they could get access to places for work or play without having to drive to them.
Finally, research from the TOD Index points out that in December 2017, the average home value in a transit-oriented development ($636 per square foot) was nearly four times the value of the average home in the United States ($164 per SF).
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